Road From Copenhagen Exec Version

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All companies, small or large, direct or indirect emitters of carbon dioxide emissions, will need to adapt their business to a future carbon dioxide regulated economy. The event to kick start this will likely be in the aftermaths of the UN conference in climate change in Copenhagen this December. Independent of outcome scenario many companies will now need to take informed business decisions on what to do, when to do it and how to do it to maximize business value.

This report discusses possible scenarios and appropriate responses for companies in eight key nordic industries.

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  • Good Presentation, if you dont mind can you share me a copy of the presentation to leovictor@marsvapours.com
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  • Interesting preso for those, who are in the subject. More backup slides would be required for the general public.

    For example,
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    Decomposition of energy costs by sources, process steps (slide 10) i.e. point out waste costs. I would also wish to see the real energy costs (waste impact on human health, biosphere and economy) as a comparison. It would increase coal costs even more making the most expensive scenario in the preso a bargain. It will also show real nuclear costs. Now the comparison (25-25) looks like a half-truth (transportation and infrastructure enabling do have carbon cap) and therefore not very persuasive.

    More full cycle costs like R&D, marketing, other investments for industrial retooling (slide 14) It is important if economies can afford the next necessary step. It is time to speak about ratio: (CO2 reduction costs/CO2 reduction rate) related to affordability.

    Costs decomposition for slide 8. What are organizational challenges in there?
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Road From Copenhagen Exec Version

  1. Road from Copenhagen - Key challenges for Nordic industries by Henrik Nihlén, Henrik Tegnér and Tomas Haglund November 25th 2009 Copyright © 2009 Accenture All Rights Reserved.Copyright © its logo, and High Performance Delivered are trademarks of Accenture. Reserved. Accenture, 2008 Accenture All Rights Reserved.
  2. The post-Kyoto route selected in Copenhagen to tackle climate change will impact strategic business decisions for key Nordic industries Executive summary Negotiations on actions against climate change will be finalized in Copenhagen • International negotiations will take place in Copenhagen in December with the goal to decide on a global agenda for handling of climate change • The negotiations should been seen in a larger context of global negotiations on trade, financial regulation and environment • Substantial political capital has been invested in the negotiations, few can thus afford to leave the negotiations without an agreement We see three possible scenarios from the negotiations • We see three principal agreement scenarios, each signified by the ambition for emission reduction, ranging from +2 to +6 degrees increase in globlal mean temperature • While many aspects of climate change will be on the table, setting emission reduction targets and agreeing on financing are the most high- profile and challenging questions Key Nordic industries will be impacted by the negotiation outcome Each company needs to form its appropriate response • Ambitious targets for reduction of carbon emissions will drive decarbonization of the most CO2 intense industries, while other industries are impacted indirectly • Each industry/company has its own challenges and possibilities of avoiding emissions or passing on carbon costs to customers– thus each industry has a unique response to climate change negotiations • This study gives general recommendations on responses in several industries Copyright © 2009 Accenture All Rights Reserved. 2
  3. While the palette of responses to climate change is similar to most industries, focus differs significantly between them Industry importance of responses to climate change* INDICATIVE Invest in new Optimize Optimize SG&A Invest in sustainability Manage current Industry production technology supply chain operations driven markets product portfolio Utilities Key area to decarbonize Energy CNR Steel Industrial Equipment Retail N/A Electonics & High-Tech Banking N/A Importance to industry of response * Climate change primarily effect industries through effects of the global Considerably Not mitigation agenda such as increasing cost of carbon emissions – the five important important general area of responses should be viewed in the light of what each area mean for each industry – i.e. supply chain has different meanings per industry Copyright © 2009 Accenture All Rights Reserved. 3
  4. Conference of Parties 15 is a UN conference in Copenhagen in December to set the international path for handling climate change Background to the United Nations Climate Change Conference COP is a conference where UN members meet to …with the goal of stabilizing the amount of greenhouse discuss climate change… gases to reduce climate changes United Nations Framework Convention on Climate Change (UNFCCC) is an environmental treaty : Five essential issues will be on the agenda for COP 15: • UNFCCC has been ratified by 192 countries since its creation • Agreement on how to handle climate change from 2012 when the Kyoto protocol comes to an end in 1992 • A Conference of the Parties (COP) is held yearly to discuss • Ambitious emission reduction targets for industrialized countries and efforts by developing countries to limit the implementation of convention‟s goals growth of their emissions • The 15th Conference of the Parties; the COP 15, will be held in • Stable, significant predictable financing for adaptation and Copenhagen 7-8 Dec 2009 mitigation of climate change • Officials from all member countries as well as many • Industrialized countries support to developing countries in organizations will attend adaption and technology for mitigation • Overall principle of global cooperation for handling climate • Setting an equitable and efficient governance structure to monitor and oversee implementation change is common but differentiated principles The negotiations is to be seen in a larger context of global cooperation on trade, financial regulation and environment - where developing countries play an increasingly important role Sources: United Nations Framework Convention on Climate Change, 2009. Essential Background. [Online] Available at: http://unfccc.int/essential_background/items/2877.php [Accessed 12 Aug 2009]. COP 15 United Nations Climate Change Conference, 2009. Climate Facts. [Online] Available at: http://en.cop15.dk/climate+facts [Accessed 12 Aug 2009]. COP 15 United Nations Climate Change Conference, 2009. About Cop 15. [Online] Available at: http://en.cop15.dk/about+cop15 [Accessed 12 Aug 2009]. United Nations Framework Convention on Climate Change, 2009. Meetings, Press conference video statement 12 June. [Online] Available at: http://unfccc.int/meetings/sb30/items/4842.php [Accessed 27 Aug 2009]. Copyright © 2009 Accenture All Rights Reserved. 4
  5. According to International Panel of Climate Change, an increasing atmospheric level of CO2 leads to rising global mean temperature Development of atmospheric CO2 and global mean temperature The level of CO2 in the atmosphere has been rising Global mean temperature has followed a since the dawn of industrialization similarly upward trend Atmospheric level of CO2 (ppm) Global mean temperature vs. 1850-1899 avg. (°C) 600 3,0 Projected increase Projected increase until 2050 if no action is until 2050 if no action is 500 2,5 taken to reduce CO2 taken to reduce CO2 emissions emissions 400 2,0 300 1,5 200 1,0 100 0,5 0 0,0 1850 1900 1950 2000 2050 1850 1900 1950 2000 2050 -0,5 • CO2 is a green house gas produced through oxidation of hydrocarbons (e.g. combustion of fossil fuels) • Increased mean temperature will lead to large effects on the environment as well as large costs • Significant abatement measures are needed to limit rising mean temperature Sources: World Resources Institute, 2009. Climate and Atmosphere. [Online] Available at: http://earthtrends.wri.org/searchable_db/index.php?theme=3 [Accessed 2 Sep 2009]. International Energy Agency, 2008. World Energy Outlook. Paris: OECD/IEA European Environmental Agency, 2009. Maps and Graphs. [Online] Available at: http://dataservice.eea.europa.eu/atlas/viewdata/viewpub.asp?id=4123 [Accessed 2 Sep 2009]. Copyright © 2009 Accenture All Rights Reserved. 5
  6. US, EU and China are the most important parties at COP 15 as they represent more than 50% of current CO2 emissions Shares of CO2 emissions for selected regions (%, absolute emissions in gigatonnes within () ) EU Russia 1990 19% (3,88 Gt) 1990 10% (2,18 Gt) 2006 14% (4,06 Gt) 2006 6% (2,18 Gt) 2020 11% (4,16 Gt) 2020 5% (1,92 Gt) USA Middle East China Japan 1990 23% (4,85 Gt) 1990 3%(0,59 Gt) 1990 11% (2,24 Gt) 1990 5%(1,07 Gt) 2006 20% (5,67 Gt) 2006 20% (5,65 Gt) 2006 4% (1,21 Gt) 2006 5% (1,29 Gt) 2020 16% (5,77Gt) 2020 6% (2,09 Gt) 2020 27% (10 Gt) 2020 3% (1,15 Gt) Latin America Africa India 1990 3%(0,60 Gt) 1990 3% (0,55 Gt) 1990 3% (0,59 Gt) 2006 3% (0,97 Gt) 2006 3% (0,85 Gt) 2006 4% (1,25 Gt) 2020 4%(1,38 Gt) 2020 3%(1,08 Gt) 2020 6% (2,19 Gt) Rest of the world 1990 20% (4,24 Gt) 2006 20% (5,49 Gt) 2020 19% (6,87 Gt) Source: International Energy Agency, 2008. World Energy Outlook. Paris: OECD/IEA Copyright © 2009 Accenture All Rights Reserved. 6
  7. We see three general scenarios for the Copenhagen negotiations, each with distinct effect on the Nordic business environment Summary of agreement scenarios Indicative Co2 price 2020 (per tonne) We see three scenarios for outcome of the negotiations, ranging from limited climate to significant climate change Scenario 1: High carbon $40-60 Scenario 2: Moderate carbon $30-40 Scenario 3: Cheap carbon in $10-20 prices in a cold world prices in a lukewarm world a hot world • Very ambitious reduction targets for • High reduction targets for developed • Breakdown in negotiations, all major emittor countries countries meaning no reduction targets • Global cap and trade market for • Sectoral agreements on emission • No sectoral agreements, nor emission credits in the long term reduction in key sectors financing of developing world • Sizeable developing world funding • Developing world receive limited • Regional and local initiatives of agreed by developed countries funding from developed countries emission reduction not affected • Increase in global mean temperature • Increase in global mean temperature • Increase in global mean temperature limited to 2° limited to 3° reaches 6° 2° 3°+ 6° Scenario parameters (e.g. increased price of carbon emissions) will effect important macroeconomic factors • Increasing price of CO2 emission will lead to increase in price of primary produce (e.g. energy) and secondary produce (e.g. aluminum and steel which are produced using signficiant amounts of energy)‟ • Use of market based mechanism for pricing of emissions might lead to increase in emission price volatility, which make investment decisions thougher to firms and reduce rate of investment in green technologies • Increased developing world financing by developed countries to support mitigation and adaptation to climate change might increase funding needed by developed world governments, leading to increase costs of doing business Copyright © 2009 Accenture All Rights Reserved. 7
  8. Depending on scenario, important economic factors, such as prices of energy, carbon and raw-material will be influenced Scenario parameters Primary lever Examples of secondary levers Low High CO2 reduction developed + CO2 price • Higher cost of energy intensive raw countries materials (e.g. aluminum) • Higher cost of carbon intense raw material (e.g. concrete, steel) Low High CO2 target developing • Increased cost of transportation, + CO2 price changed relative prices countries Free Auctioning Relative price of • Lower relative barriers to entry for CO2 credit distribution credits new market players Taxation Market Orientation of + CO2 price • Increased difficulty in making abatement models volatility investment decisions Low High +Higher public • Increased cost of making business Public financing financing need and cost in developed countries 2° Global agreement1 3°+ Sector based agreement2 6° Negotiation Breakdown3 Notes: 1)Corresponding to IPCC Class I scenarios; 2) Corresponding to IPCC Class I scenarios; 3) Corresponding to IPCC Class I scenarios Sources: World Energy Outlook, Commission of the European Communities, 2007; IPCC Copyright © 2009 Accenture All Rights Reserved. 8
  9. Utilities Dependent on scenario, the Utilities industry will face Example pressure to step investment in de-carbonization Summary of Nordic utilities industry climate change responses 2° +3° 6° Need for new technologies and Necessary investments in mature Remaining commercial and public investment to replace fossil fuel technology in new Nordic generation pressure on the Nordic utilities based generation plants infrastructure industry to decarbonize Scenario 1: De-carbonization of utilities - Scenario 2: Partial decarbonization- high CO2 Scenario 3: Slow utilities de-carbonization - higher global CO2 prices prices in OECD low CO2 prices • Large investments and research in • Significant replacement and upgrade of • Less pressure on utilities to de- breakthrough utilities technologies will be the Nordic utilities infrastructure is carbonize, some de-carbonization featured- in e.g. CCS and renewables required – e.g. expansion of renewables, investments still needed though– i.e. smart grids new CCP, wind-turbines • Smart-grids will be necessary to enable vehicle electrification and distributed • Existing technologies will be sufficient for • Players with international fossil based generation partial de-carbonization of Nordic utilities production will still face pressure – i.e. Vattenfall, Fortum • Changed relative prices will give • CCS might be required as an alternative incentives for investment in to nuclear and biofuels in Finland and • Finland and Denmark will not have to carbon-free production Denmark. decarbonize as quickly as in th e more (e.g. nuclear) stringent scenarios • Utilities should seek cooperation to • Nordic utilities companies need to step • Utilities companies should consider finance new research and investments in up research and investments in some investments in renewable energy breakthrough technologies renewable technologies • Ageing infrastructure still need to be • Government and corporate co-operation • Governmental and corporate replaced (e.g. Swedish nuclear power is necessary to develop new general cooperation on research and investment plants),but no breakthrough technologies production technologies will still be necessary but mature will have to be deployed technologies can be used Copyright © 2009 Accenture All Rights Reserved. 9
  10. Utilities Investments in renewables and nuclear are Example strongly favored at high CO2 prices Nuclear and coal are nore cost efficient new power …however, a significant rise in carbon emission price to fill future power demand strongly favors CCS and renewables Cost of new production (€/MWh) Cost of new production, scenario 1 (€/MWh) 250€/MWh 250€/MWh Indicative 200 Solar Power 200 Solar Power Emission cost: 0€ Emission cost:50€ Fossil power plants become significantly more expensive to run 80 Coal (non CCP) 70 Wind 75 Gas 60 Hydro 70 Wind Clearly most viable 60 Hydro power investments 55 Gas 50 Biomass, CHP 55 Biomass, CHP 40 Coal 25 Nuclear 25 Nuclear 0€/MWh 0€/MWh Sources: IEA 2009; UK Parliamentary Office of Science and Technology, postnote on Carbon Footprint of Electricity Generation, Accenture analysis Copyright © 2009 Accenture All Rights Reserved. 10
  11. Energy Energy system de-carbonization demands large scale Example co-operation, but speed is dependent on scenario Summary of Nordic energy industry responses 2° +3° 6° Strong investment in renewable Investment in some renewables, Investment in oil and gas recovery, energy, as well as advanced gas increased Asian demand for gas and little investment in renewables exploration and recovery oil warrants investments Scenario 1: Decarbonization of e.g. utilities Scenario 2: Partial decarbonization- high Scenario 3: Slow de-carbonization - low and transport CO2 prices in OECD CO2 prices • Demand for natural gas will increase • Demand for fossil fuels will shift to gas, • Global general demand for fossil fuels strongly, driving up price – making tertiary increasing demand –coal will need to be will increase strongly, and need to be extraction and investments in new fields replaced in Western Europe in the long met with new production from new deep- viable term as a source of power sea oil and gas fields • Increased investments in renewable • Renewable energy sources will become • Renewable energy sources will be a energy will be needed for global economically viable in some industries, complementary in some application, but decarbonization of some sectors – e.g. i.e. power production, plastic no large-scale decarbonization transportation, power production manufacturing • Investments in CCS for gas extraction • Investment in CCS should be highly viable • Investment in CCS will be viable for most might be viable applications • Nordic energy companies should • Nordic energy companied should • Nordic energy companies should research and invest in renewable consider expanding research and consider some investments in renewable energy, i.e. biofuels, wave-power, investment in renewable energy energy marine wind-power • Investments in tertiary gas recovery, • Investments in gas and oil recovery and • Investments in new oil fields should still new, hard to reach gas fields and CCS infrastructure should continue be considered to meet peak-oil, as should be considered decarbonization will be a slow proces Copyright © 2009 Accenture All Rights Reserved. 11
  12. Increasing global CO2 emission costs will give Western Energy firms a strong incentive to improve carbon efficiency Example and invest in LNG 2° +3° 6° Expensive CO2 emissions will Moderate increase in emissions price Low CO2 cost will not make CO2 drive need for investment in will have impact on viability of CO2 efficient technologies considerably efficient extraction and transport mitigation technologies attractive CO2 emissions from natural gas extraction and transport, Effects of global increase in CO2 prices gas delivered in EU (kg/Gjoule of gas) * • Western extraction firms with international Pipeline - Transport and Storage 2 2 4 operations will need to improve CO2 efficiency: NW Europé Liquefaction − Gas production outside EU is comparably CO2 Production inefficient , not only due to transport Pipeline - − Investments in reduced flaring, CCS etc. 5 10 15 Russia should be considered Corresponds to ~70% of the CO2 emission from • Investments in LNG terminals, transport etc. LNG - combustion 3 10 7 20 should be considered: North Africa − LNG is likely to get more attractive for EU countries looking to replace dirty coal power LNG - and ageing nuclear plants 17 10 10 37 West Africa • In the long term however, LNG might be less LNG - attractive due to installation of CCS in EU: 4 10 9 23 Middle East − CCS installation and increasing transportation costs lead to cost disadvantage for LNG * Oil and gas production emit CO2 through flaring, venting, turbine operation, fluids processing and fugitive losses Source: Liquefied Natural Gas for Europe– Some Important Issues for ConsiderationEuropean Commission 2007; BP Statistical Review 2008 Copyright © 2009 Accenture All Rights Reserved. 12
  13. CNR Steel Dependent on scenario, COP15 has the potential to Example change the rules of the game for steel manufacturers Nordic steel industry responses 2° +3° 6° Global shift to ultra-low CO2 Worsened Nordic mill Optimization of current mill integrated mills and competitiveness, partial shift to ultra technology but no case for further stronger case for recycling low CO2 mills technological shift Scenario 1: Significantly higher global CO2 Scenario 2: High CO2 prices in OECD, Scenario 3: Low OECD and BRIC country prices no/low BRIC price increases CO2 prices • Research and investment in • Improved new production methods will be • Breakthrough CO2 reduction breakthrough technologies will be required required in the long-term to stay technologies will not be viable (e.g. - CCS and electrolytic production competitive to traditional BRIC CCS) in the short and medium term manufacturers • EU CO2 emission cost slightly higher • Demand for high strength steel will increase as it is important to reduce CO2 • Optimization of mature technologies will than today will have limited impact on emissions in many final products be important as these demand smaller Nordic steel manufacturers investments • Prices of raw-material and final products • Price of scrap-metal will increase over time responding to increased demand • Scrap-metal prices will increase over time will increase as primarily Asian from mini-mills responding to increased demand from economies rebound mini-mills • Nordic integrated mills should consider • Western Europe steel manufacturers will • Western European steel makers will not increase in research and development in be disadvantaged compared to BRIC be affected to a large degree in any new production technologies steel manufacturers direction • The situation should also be monitored • Increased specialization and long-term closely and investment in low CO2-cost investments in low-CO2 production countries considered technologies should be considered Copyright © 2009 Accenture All Rights Reserved. 13
  14. Technologies to materially decrease CNR Steel CO2 emissions from steel production exist, but are only Example economically viable at high CO2 prices Steel production cost, including carbon cost vs. indication of CO2 mitigation technology investment viability Breakthrough steel production technologies and CCS brown field technologies will likely complement each other 646 526 544 568 Carbon 120 +23% 0 18 42 27 27 27 27 Production raw material Metal raw material 187 187 187 187 Reduction agent and energy 170 170 170 170 Fixed production costs 142 142 142 142 Current cost 6° 3°+ 2° Breakthrough Retrofit of existing mills with CCS and Limited investment technologies Viability of biomass capabilities viability in become viable limiting CO2 (Advanced blast furnace with CCS, biomass CO2 mitigation (Electrolysis and emissions advance furnace, DRI with CCS) technologies smelting reduction processes) Source: IEA, Biras et al 2005, Accenture estimates Copyright © 2009 Accenture All Rights Reserved. 14
  15. Industrial equipment manufacturers are less sensitive to Ind. equip the outcome in Copenhagen, but must respond to Example increased emphasis on CO2 emissions Similar strategic response for the industry applies to all COP 15 outcome scenarios but with different emphasis 1 The industrial equipment industry must adapt and develop product portfolios Higher cost of CO2 emissions will lead to customers demanding CO2-efficient products • Manage product portfolio as to understand all aspects and influences of sustainability • Reduce life-time CO2 emissions of current products and invest in alliances to develop low CO 2 products • Invest in products for markets dependent on high emission prices, such as renewable power production 2 The industrial equipment industry should reduce it’s own CO2 emissions from operations The cost of energy and CO2 emission will increase driving need for partial industry de-carbonization • Implement energy saving processes in facilities, such as selecting Smart Buildings and Green IT • Utilize travel management and telepresence to reduce emissions from operations • Review energy use from lighting, cooling, heating etc. 3 The industrial equipment industry should integrate sustainability in supply chain optimization As energy and emission costs rise supply chain optimization will become even more important • Optimize production to reduce cost of CO2 emissions in manufacturing • Optimize supply chain networks to reduce costs and emissions • Emphasize value engineering to reduce product life-time environmental footprint and enhance value Copyright © 2009 Accenture All Rights Reserved. 15
  16. Value engineering enhances value and reduces supply Ind. equip chain emissions by improved functionality and Example efficiency Revenues Emissions Costs Increased revenues Decreased costs due Increased revenues Increased revenues and Reduced emissions due due to better fit of to better cost and decreased costs increased costs to to improved production product functions with efficiency in product generate revenues, but efficiency material use customer needs and/or process design with positive net effect EXAMPLE Previous Benefits • ~20% reduction of product cost • Reduced vehicle weight due to materials savings • Reduced warranty costs due to complexity reduction Value Engineering Old design with complex assembly New, cheaper, design with same functionality Copyright © 2009 Accenture All Rights Reserved. 16
  17. Retail COP 15 will indirectly impact the retail industry by Example increased energy cost and a shift in consumer behavior Similar strategic response applies to all scenarios but with different emphasis 1 Retail companies should establish green credibility with consumers Consumers are getting increasingly climate conscious and their preferences are shifting accordingly • Ensure green position is coherent to brand position through effective category management processes • Capture green market opportunities by selecting green products • Increase product traceability by using consumer labeling / carbon labels • Implement green store concept by introducing/enhancing green offerings and services 2 Retail companies should reduce energy consumption to minimize cost The primary driver for energy reduction is that the price of energy will increase due to a higher cost of CO 2 emissions • Review internal processes for energy efficiency • Optimize use of electricity, water etc in stores and warehouses to reduce cost 3 Retail companies should optimize supply chain to minimize cost and CO2 emissions Higher cost for CO2 emissions will increase transportation cost • Review sourcing model according to sustainability impacts • Optimize distribution network to reduce total vehicle mile and to use more rail Copyright © 2009 Accenture All Rights Reserved. 17
  18. Retail Typical green consumer groups can be identified Example covering almost 60% of consumers Three consumer groups representing over 60 % of consumers frequently buy society friendly products* • Consumers in the lifestyle group (LOHAS Lifestyle of Health 17% 16% Lifestyle and Sustainability) are searching for a ”green” lifestyle where Unconcerned Lifestyle personal and global health have the highest priority • Consumers in the naturalist group are also searching for 17% Naturalist ”green” products, but the personal attributes of the 26% Naturalist products go first Conservative • Consumers in the drifters group have good intentions but it 24% Drifters is translated into a mixed behaviour since it is a price Drifters sensitive group • The study is based on American consumers, but given Swedes environmental awareness similar behaviour can be assumed • In a similar study by IRI (also with American consumers) it was discovered that these groups on average use 15 % of their disposable income to buy products with a connection to these attributes. • This coheres with the environmental friendly consumer trend which have gone from niche to eco-chic to eco-iconic i.e. it is becoming cool to be aware when shopping Source: AC Nielsen; Winning at green innovation, 2008 (LOHAS); IRI consumer research; Copyright © 2009 Accenture All Rights Reserved. 18
  19. EHT COP 15 will indirectly impact the EHT industry by a rising Example request for energy efficient products and systems Similar strategic response applies to all scenarios but with different emphasis 1 EHT companies should provide products for system wide CO2 reduction Products that enable CO2 emission reductions and cost reductions will be needed to reach emission targets • The EHT industry should invest in production of goods that enable CO2 reduction for businesses and society • There are five major areas for EHT companies to invest in; Smart grid, Smart logistics, Dematerialization, Smart cities and Smart manufacturing 2 EHT companies should provide products with low energy requirements The demand for energy efficient products will rise due to a higher energy cost • The EHT industry should focus on producing products that are energy efficient 3 EHT companies should streamline supply chain for low cost and emissions As energy and emission costs rise supply chain optimization will become even more important • Optimize energy use in operations (lighting, heating, cooling, waste management etc) • Review all aspects of the supply chain (route optimization, distribution networks etc) Copyright © 2009 Accenture All Rights Reserved. 19
  20. EHT Scenario EHT companies should provide products to enable independent system wide CO2 reduction Example Investment in five key EHT areas gives a potential 2,4% CO2 EU emission reduction of 113 Mt annually emissions reduction in EU-25 by 2020* Possible CO2 emission reductions by 2020 through EHT focus areas(Mt CO2) Improving efficiency of electricity grids through e.g. active Smart grid 43.1 monitoring and distributed generation Monitoring and tracking vehicles and their loads to improve the Smart logistics 35.2 efficiency of logistics operations Replacing physical goods, processes or travel with „virtual‟ Dematerialization 22.1 alternatives (e.g. video-conferencing) Improving traffic and utilities management in cities to Smart cities 10.5 reduce emissions Synchronizing manufacturing operations and adding Smart manufacturing 1.9 communication ability to produced goods Total 112.8 * -112,8 Mt =2,4% reduction compared to 1990 levels Source: Accenture/Vodafone, 2009. Carbon Connections: Quantifying mobile’s role in tackling climate change Copyright © 2009 Accenture All Rights Reserved. 20
  21. Banking The banking industry will be impacted by COP 15 Example policies on CO2 on emission levels and trading schemes Similar strategic response applies to all scenarios but with different emphasis 1 The banking industry must adapt to the effect of climate change on clients Clients will increasingly be effected by climate change are increasingly conscious • Assess climate change related risks of corporate loans and bonds to e.g. adjust rates accordingly • Create offerings and services specifically tailored at need for carbon efficiency (e.g. loans for energy reduction) • Create green investment themes for retail investors (e.g. green tech funds) 2 The banking industry should reduce own CO2 emissions and cost through green operations The energy price will increase due to a higher cost of CO2 emissions • Invest in green operations to reduce cost and emissions • Use digitalization of documents and processes to reduce emissions and associated costs • Invest in green IT to reduce energy consumption 3 The banking industry should move into the area of carbon financing In the case of a Cap and Trade system there will be need for an intermediary between CO 2 suppliers and end users • Expand product portfolio with carbon financing options for corporate clients • Build expertise to advice customers in emissions trading Copyright © 2009 Accenture All Rights Reserved. 21
  22. Banking Scenario Banks should also develop and market green consumer independent products and services Example 86% of consumers are concerned for Banks should attract customers with a climate change compelling environmental agenda Consumers concerned for climate change (%)* 1. Offer green wholesale consumer products − Create green credit cards & personal loans for consumer No, not at green investments (e.g. solar panels, heat punmps) all concerned − Give consumer “green” enhancements through improved No, not very 3% advisory for consumers concerned 11% Yes, extremely concerned 2.Offer green investment opportunities 38% − Create mutual funds for investment in e.g. venture capital companies in green technology space − Create retirement funds with green investment agenda 48% Yes, somewhat concerned * Question asked: “Are you concerned by climate change?” Sources: Accenture, 2009. Accenture End-Consumer Observatory on Climate Change Accenture, 2009. Sustainability in Banking: an unexplored way to regain reputation and trust Accenture, 2009. Sustainability Industry Overview Copyright © 2009 Accenture All Rights Reserved. 22
  23. About document and authors This is an executive version of the study Road to Copenhagen – key challenges for Nordic industries. The full version can be requested from any of the following authors: • Henrik Tegnér is responsible for management consulting in the resources industries in Accenture Nordic. Through his clients he has come into direct contact of the climate change issues facing the resource industry. Henrik is a Senior Executive at the Stockholm office being part of Accenture Strategy. He has been working 14 years at Accenture. Henrik Tegnér henrik.tegner@accenture.com +46 8 451 3422 • Tomas Haglund is lead for our offerings within Sustainability in Accenture Sweden. He is a Manager at the Gothenburg office also being part of Accenture Strategy. He has been working 5 years at Accenture. Tomas Haglund tomas.haglund@accenture.com +46 31 339 4118 • Henrik Nihlén is responsible for strategy questions related to Sustainability. He is a Consultant at the Stockholm office and a part of Accenture Strategy. He has been 4 years with Accenture, mainly working with Utility related questions. Henrik Nihlén Henrik.nihlén@accenture.com +46 8 451 3899 Copyright © 2009 Accenture All Rights Reserved. 23

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